TOKYO (Reuters) - Asian shares regained some ground on Tuesday after U.S. President Donald Trump faced growing pressure from political allies to pull back from proposed steel and aluminum tariffs, easing investor worries about an imminent trade war.

Sentiment was also supported by receding risk aversion in Europe with the euro gaining support from the creation of a coalition government in Germany and the impact of Italy's inconclusive election results limited to a mild sell-off in domestic bonds and stocks.

Korean shares have erased all the losses they had taken after Trump's announcement even though the country is seen as being among the worst affected in region by the tariffs due to its big steel exports to the United States.

MSCI's broadest gauge of the world's stock markets rose 0.3 percent after having snapped a four-day losing streak on Monday with a gain of 0.7 percent.

Wall Street shares have now recouped all the losses incurred after Trump unveiled a plan to impose tariffs on steel and aluminum late on Thursday.

Leading Republicans, including House of Representatives Speaker Paul Ryan and Representative Kevin Brady, turned up the pressure on Trump to rethink the plan on Monday.

Some investors also saw the tariffs threats as a U.S. negotiating tactic to get a better deal on NAFTA.

Still, uncertainty remains with confusion about the timing and extent of the planned tariffs inside the White House. Trump said on Monday he would not back down, without elaborating.

Trump was expected to finalize the planned tariffs later in the week, although some observers familiar with the process said it could occur next week.

The specter of a trade war was not the only source of concern for the stock market.

As the global economy steams ahead, investors have become increasingly concerned that U.S. inflation, which has been subdued since the 2008 financial crisis, could finally pick up.

"Given the importance of bond yields to equity valuation, equity investors are affected by potential changes in bond yields just as much as fixed-income investors," said Colin Moore, Global Chief Investment Officer at Boston-based Columbia Threadneedle Investments.

"In the current environment, although inflation appears to be increasing, it's still not likely to cause 10-year yields to rise to levels that would be problematic for equities. I estimate that problematic level to be a 4 percent yield."

U.S. bond yields rose as Wall Street shares rallied. The 10-year U.S. Treasuries yield rose back to 2.882 percent from last week's low of 2.793 percent. A break of last month's peak of 2.957 percent could trigger fresh selling in Treasuries, traders say.

In the currency market, the euro traded at $1.2352, extending its recovery from a seven-week low of $1.21545 hit on Thursday.

The euro managed to recover losses made on Monday after two anti-establishment leaders made early plays to govern Italy following an inconclusive election where voters shunted mainstream parties to the sidelines.

As none of the three main factions had enough seats to govern alone, President Sergio Mattarella is expected to open formal coalition talks in April, with early elections possible if no accord is found.

"With any coalition that can be formed likely to have a right of center bias, this ought to be bad for the euro but the German election result appears to have counterbalanced any detrimental effects. We are holding to our pre-election stance that this is not the time to be adding Italian risk," said Paul Hatfield, Global Co-Chief Investment Officer at Alcentra, part of BNY Mellon Investment Management.

The dollar fetched 106.41 yen, up 0.2 percent for the day, crawling back from its 16-month low of 105.24 touched on Friday on improved risk appetite.

The Canadian dollar hit an eight-month low of C$1.3002 per U.S. dollar as U.S. President Donald Trump used proposed tariffs on steel and aluminum as a bargaining chip in talks to revamp NAFTA.

Crude prices held firm, underpinned by robust demand forecasts and prospects for informal contacts sought by OPEC with U.S. shale oil producers at a key industry meeting in Houston this week.

U.S. West Texas Intermediate crude futures traded at $62.62 per barrel, almost flat after 2.2 percent gain on Monday.

(This version of the story has been refiled to correct typographical error in the first paragraph)